Sunday, August 13, 2006

Sauna trauma revisited

Sunlight Saunas, Inc. v. Sundance Sauna, Inc., 2006 WL 2088324 (D.Kan.)

After the court denied summary judgment on most of plaintiff’s claims, discussed here, the case of the dueling sauna claims proceeded to trial.

The jury found Sundance liable for $2,500 actual damages and $150,000 punitive damages for defamation under Kansas law; liable for $1.00 actual damages for false advertising and $1.00 actual damages for false description under the Lanham Act; and not liable for cybersquatting under the Anticybersquatting Consumer Protection Act (as well they should have; that ACPA claim was bad!). On the counterclaims, the jury found Sunlight liable for $1.00 actual damages for false advertising in violation of the Lanham Act. Defendants moved for judgment as a matter of law on the claims they’d lost; the court denied the motion.

Sundance was founded by a former Sunlight employee who was bitter and said that he’d devote “unbelievable resources” to dissolve Sunlight. Sunlight made some claims about its saunas that weren’t true; at, Sundance accused Sunlight of lying. Sundance’s accusations went a bit beyond the established untruths and included some inflammatory (no pun intended) statements about the safety of Sunlight’s heating elements.

After the website went up, sales decreased, Sunlight had to lower its prices, and more sales were cancelled. Sunlight’s sales director testified that customers were agitated and asked numerous questions, including: "Are your heaters toxic?;" "Am I going to get Alzheimer's disease from using your heaters?;" "How do I know you're not going to go out of business?;" "Is my house at risk from a fire hazard if I buy your sauna?;" and "Where can I get more information about your company so I can feel better about working with you?" The sales director testified that she never tried to calculate actual damages and in fact she characterized them as "impossible to quantify." This was sufficient evidence to justify the damage award for defamation by accusations of “lying.” (It sounds like it wasn’t the defamation – the accusations of lying – but the product disparagement – the accusations of flaws in the saunas – that was the problem, and since Kansas doesn’t recognize business disparagement, I’m not sure the court’s right here. But given that the disparagement was necessarily entwined with the defamation, maybe it’s justified.)

The jury, bizarrely, found that Sundance engaged in false description by using the Sunlight trademark on the “exposed” website in violation of § 43(a)(1)(A) of the Lanham Act, and thus awarded $1.00 actual damages. How this could possibly be a false designation of origin is beyond me, since no one could have thought this was an official or authorized Sunlight site. The court held that, regardless of the degree of care exercised by purchasers, Sundance wasn’t entitled to judgment as a matter of law because of the “strong” evidence on the other factors (name similarity, malicious intent to harm Sunlight, and shared marketing channels). This is a case in which application of the standard confusion test produces ridiculous results, and the court (and jury) let the multifactor test obscure common sense. I don’t really understand how the jury got this wrong when it managed to reject the ACPA claim.

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